Securities — Circuit Split as to Whether Plaintiff or Defendant Must Show Control Person’s Good/Bad Faith and Inducement, Vel Non, of Primary Violation under Section 20(a)

Poptech, LP v. Stewardship Credit Arbitrage Fund, LLC, 792 F. Supp. 2d 328 (D. Conn. 2011):

Section 20(a) [of the Exchange Act, 15 U.S.C. § 78t(a),] provides that a controlling person is liable unless the defendant acted in good faith and did not induce the primary violation. See 15 U.S.C. § 78t(a). But Section 20(a) does not specify whether under the "unless" clause the plaintiff must show lack of good faith and inducement, or whether the defendant must show his or her own good faith and lack of inducement. Either is fully consistent with the text, and there is a circuit split regarding that particular issue. Compare ATSI Communication, 493 F.3d at 108, with Frank v. Plumbers & Pipefitters National Pension Fund, No. 09-4233, 646 F.3d 954, 2011 U.S. App. LEXIS 10437 at *18 (6th Cir. May 25, 2011).

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